Company transformations are interesting opportunities for investors, but not without some risks. I’ve seen plenty of companies announce new initiatives, products/services, and corporate priorities that were little more than attempts to prolong and extend a failed management’s tenure at the helm. But I’ve also seen company transformations that were, well, transformational, leading to major shifts in revenue and margins.
I like what Digi International (NASDAQ:DGII) is shooting for in its IoT Solutions business – offering customers a simplified approach to leveraging IoT for functions like asset tracking and condition monitoring. I also like the exposure to out-of-band network management solutions, and I’m not all that troubled about Digi’s prior history as a lackluster communications hardware company.
My biggest concern at this point is competition/barriers to entry – I would think that Digi’s monitoring services should be relatively sticky once they’re in place, but I have some concerns that are there’s really no “secret sauce” here that would block out other potential rivals.
Even with that concern, these shares look interesting below $20, as I believe high single-digit revenue growth and scaled-up margins can drive a double-digit long-term return from here.
Read the full article here:
Digi International Digging Into The Emerging IoT Service Opportunity
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